The share of GDP allocated to health spending in the United States (excluding capital expenditure) was 16.4% in 2013, compared with an OECD average of 8.9%. To figure out why the US spends so much on healthcare, we need to look at where the money goes.
Glad you asked.It goes mostly to outpatient care, hospitals and nursing homes, which comprise about 75% of US healthcare spending*. These categories of spending amount to almost $6000 per capita, compared to less than $3000 per capita (PPP) in Germany, France, Canada, and Japan. Why are our costs so high? I’ll focus on four areas: hospital services, salaries, diagnostic tests and medical interventions.
First, hospitals:
Ok, the chart’s a little old but you get the picture. More recent data puts a hospital stay in the US at over $18,000 on average. The countries that come closest to spending as much — Canada, the Netherlands, Japan — spend between $4,000 and $6,000 less per stay.
Why are inpatient hospital services so expensive? Lots of reasons, many having to do with healthcare worker salaries, excessive diagnostic testing and medically unnecessary interventions. Fear of litigation is an important factor in over-testing and the fee-for-service system incentivizes physicians to do more interventions.
Next: Salaries of healthcare professionals
Note: these posts seek to provide the general lay of the land and are not meant as in-depth analyses.